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Using the net realizable method, assign costs to A and B

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A company processes a chemical, dx-1, through pressure treatment. The process has two outputs, A and B. The January costs to process dx-1 are $50,000 for materials and $100,000 for conversion costs. The outputs sell for a total of $250,000. The sales revenues from A are $200,000 of the total. Using the net realizable method, assign costs to A and B for January.

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Solution Summary

So, we first compute the NRV for each product. Then, we use the proportion of this total to allocate the common costs.

Click in cells (attached in Excel) to see exact calculations.

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Net Realizable Value:

This method uses the final selling price less the cost to process ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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